Divorce or separation can be one of the most emotionally challenging and financially complex times in your life. The decisions made during this period may have far reaching effects for the remainder of your life.
When deciding to get divorced or dissolve a civil partnership, most people will usually instruct a solicitor in the first instance. Professional legal advice is a vital aspect of achieving the desired outcome in your divorce. In addition, taking financial advice before, during and after your divorce – and the earlier, the better, will also provide the best chance of achieving a financial settlement that delivers the security you need going forwards.
Since the Divorce, Dissolution and Separation Act became law in April 2022, the divorce process has become less adversarial in nature. Essentially, the legislation removed the need to provide grounds for divorce, enabling couples to focus on reaching a financial settlement that meets both parties’ needs. This enables you, your solicitor and your financial adviser to work together to concentrate on what really matters: empowering you both to move on with your lives in the best possible legal and financial position.
How engaging a financial adviser early on can help
The full implications of dividing the matrimonial assets, such as pensions, property, savings and investments, may not become apparent until months or even years post-divorce. The importance of financial advice in the run up to your divorce cannot be overstated. Your financial adviser will be able to ensure that any financial or tax implications which may be incurred during the divorce process are fully understood and planned for.
If involved early enough in the process, your financial adviser will also be able to work closely with your solicitor to ensure that your financial settlement is fair and accurately reflects your needs. They will be able to provide your solicitor with a range of useful documents and reports. This could include valuation reports on assets such as the family home, pensions and investments, assist with the full disclosure of financial assets via ‘Form E’, and generally ensure that you have a full understanding of your current and ongoing needs so that the settlement can be optimally structured to meet them.
Understanding your current and future financial situation
At Partners Wealth Management, our online methodology, the Lifetime Wealth Model, will help – to build up a clear and detailed picture of all your wealth and assets in one place. This gives you clarity over where you are now and what a settlement can deliver over your lifetime, as well as helping with decision making. We can help you to calculate how much money you will need to maintain your desired lifestyle following your divorce and demonstrate how different financial plans and strategies will impact these figures.
Therefore, any decisions made while structuring your financial settlement will be rooted in fact and you can be confident that your financial settlement not only reflects your needs in the here and now but will be there to provide for you long into the future. Our Lifetime Wealth Model is designed to support you with your future financial decisions and, most importantly, give you valuable peace of mind.
The impact of financial advice on your divorce settlement
There are many ways in which professional financial advice can have a real and lasting impact on your divorce settlement.
1. Securing your children’s future
The welfare of children, if present, will always take highest priority in the eyes of the law. The courts will want to ensure that children are provided for emotionally as well as financially, and to minimise any upheaval as a result of the divorce. This is likely to have a range of financial ramifications. For example, the children’s primary caregiver will usually be able to retain the marital home to provide them with stability as they grow up. The court may order one or both parties to continue paying their school fees, if there is the financial means to do so.
By involving a financial adviser in your divorce at an early stage, you can ensure that your children’s current and future needs are accurately calculated and well provided for. Your adviser will be able to work with your solicitor to secure the financial support your children will need to thrive and to minimise any disruption to their lives and chances for the future.
2. Financial disclosure
A specialist financial adviser will help ensure you have fully disclosed of all the financial assets to be included in the divorce settlement via Form E. Particularly if you have not been directly responsible for your finances during your marriage, asset disclosure can be a long and arduous task and, without advice, you may accidentally overlook assets that need to be reported, which can result in serious financial and legal consequences.
3. Tax efficiency
Your financial adviser can help reduce any tax liability you may attract when transferring assets as ordered by a court, especially if they are instructed early. This might involve taking full advantage of any tax planning opportunities available to you while you are still married. This is particularly important when it comes to Capital Gains Tax (CGT), as married couples benefit from the inter-spouse CGT exemption, potentially resulting in saving substantial sums.
We will also look at the tax treatment of your pensions, investments and other assets to ensure that the division of your assets results in the lowest possible tax bill. Structuring your assets for tax efficiency during divorce can enhance the value of your respective assets and leave you in a better financial position following your divorce.
Looking to the future, our advisers can work with you to implement a Tax Optimisation Strategy, which will address the payment of future tax bills alongside longer-term tax planning measures. Our investment independence also means that we can assist you in developing a well-researched investment strategy that meets your needs.
After property, a pension is likely to be the most valuable asset a person will own – so it is vital that they take a prominent place in your financial planning.
According to a recent survey from Aviva1, 15% of respondents did not realise that their pension could be impacted by divorce and 34% did not make a claim on their ex-partner’s pension, as it was not included as an asset in their divorce settlement. Given that pensions can be very substantial, this oversight could cause significant impact when heading into retirement.
Taking professional financial advice as you move on from your divorce is just as important as taking it earlier on in the process. Your financial adviser will help you establish new financial goals in line with your new level of income and outgoings, realign your investments to reflect your situation post-divorce and ensure you have an ongoing financial plan in place to move into this new chapter of your life with confidence.
Get in touch
If you would like to know more about how our financial advisers can support you before, during and after your divorce, please contact us on 020 7444 4030 or email@example.com.
The contents of the article have been prepared solely for information purposes. The article contains information on financial products and services and such information is designed for and addressed solely to individuals seeking generic industry information. Past performance is no guide to future returns. The above content does not represent a personal recommendation. Taxation will depend on your individual circumstances and may be subject to change.